CMG AdvisorCentral

Tactical investing news, views and resources for financial advisors

OAAS Webinar Notes

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Mike Sciortino and Michael Hee present the CMG Capital Management Group Opportunistic All Asset StrategyThe CMG Capital Management Group Webinar on the Opportunistic All Asset Strategy (OAAS) was well attended by advisors who seek tactical portfolio solutions for their clients. OAAS is a broadly diversified tactical investment solution for global asset allocation.

The CMG Capital Management Group Opportunistic All Asset Strategy is a fully diversified tactical portfolio with a defined risk management process. The goal is to capture broad bull market gains, with the  flexibility to reduce the risk in bear markets.

The CMG Opportunistic All Asset Strategy is a quantitative investment strategy that analyzes a broad universe of mutual funds or exchange traded funds (ETFs) to determine a portfolio allocation with the goal of generating positive returns over multiple market cycles.

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Tactical Rotation Strategy Webinar

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Michael F. Sciortino, Sr. Executive Vice President, Managing Director, Head of Distribution, CMG Capital Management Group

Michael F. Sciortino, Sr. Executive Vice President, Managing Director, Head of Distribution, CMG

On Wednesday, December 3rd at 12:00PM EST, Mike Sciortino and Michael Hee will discuss the CMG Tactical Rotation Strategy and why it makes sense in your clients’ portfolios today.

To register for the webinar, please sign up here:  https://www3.gotomeeting.com/register/119847414

The CMG Tactical Rotation Strategy (TRS) seeks to generate returns in all market conditions based on the concept that various asset classes and sectors experience bull and bear markets at different times.

The strategy employs an equally weighted strategic rotation model and allocates the portfolio to the top two asset classes from a universe of six: Domestic Equities, International Equities, Bonds, Commodities, REITs & Cash.

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Considering Risk & Return in Choosing Investment Options

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Michael Hee Managing Director, Investment Research CMG

Michael Hee
Managing Director, Investment Research
CMG

In our previous posts on risk we examined the definition of risk and how to measure risk.  In this post we will examine how to measure risk and return through statistics by examining ways to compare the risk-adjusted performance of investments with differing risk and return profiles.  Incorporating these ideas will help you determine the most appropriate investment choices for your clients.

The Sharpe ratio, developed by Nobel Laureate William F. Sharpe, is a statistic which measures risk-adjusted performance.  The ratio expresses how much additional return is received from an investment portfolio for each additional unit of risk taken on.  It is calculated by subtracting the risk free rate of return, such as the 3-month T-bill rate, from the rate of return for an investment and dividing by the standard deviation of the portfolio returns.

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How to Measure Risk in Investments

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Michael Hee Managing Director, Investment Research CMG

Michael Hee
Managing Director, Investment Research
CMG

In my previous post we discussed “What is Risk.”  As a follow-up, we will begin to explore how to measure risk.  When considering investment options, analyzing performance statistics without consideration of risk does not provide a view of the complete picture.

One of the most common measurements of risk is standard deviation, which statistically measures how observations are dispersed around a central tendency.  From an investment perspective, standard deviation measures how performance may be dispersed about an expected return.

For example, from January 1, 2007 through December 31, 2013, the annualized return of the S&P 500 TR Index was +6.13%.  As a comparison, the return of the Barclays Aggregate Bond TR Index (Agg Bond) was +4.91%.   However, the standard deviation of the S&P 500 Index was 16.91% compared to 3.44% for the Agg Bond.  From an average return perspective, not much difference, however the potential dispersion is significant.

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Considering Risk in a Portfolio

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Capital Management Group, Inc., Mike Hee

Michael Hee
Managing Director, Investment Research
CMG

What is risk?

At its most basic level, risk can be defined as the extent to which actual investment performance may deviate from expectations.  Defining and establishing appropriate expectations is a critical aspect of a financial advisor’s business.

Prior to joining CMG Capital Management Group, while working as a consulting Actuary; I made a living by putting a price tag on risk.  Insurance companies need to be reasonably convinced that the premiums they charge their clients will be sufficient to cover future claims, administrative and operating expenses, and provide profit while constantly maintaining a competitive premium level in order to attract and retain clients.  This is a complicated endeavor which involves more than a bit of science as well as art.  Having a sound understanding of risk is critical to being able to quantify it.

Here at CMG, we often spend time discussing risk with financial advisors to help them appropriately allocate their clients’ portfolios.  Often what appears to be a well diversified portfolio from an asset allocation perspective turns out not to be well diversified from a risk perspective.

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